Our Goal: Optimize sector and security selection within duration segments
We believe each insurance client is inherently unique and requires a customized investment strategy that matches its liability profile. AAM’s investment grade fixed income strategy offers insurers a diversified portfolio that seeks to emphasize stable income, predictable cash flows and stable credit ratings. AAM is designed for the insurance industry. Insurance portfolios seek a yield-oriented approach within a risk-controlled framework that seeks to minimize credit impairments and deliver competitive return over a market cycle.
- Portfolio duration establishment based on client liabilities and surplus
- Cash flows laddered across maturities
- No interest rate bets
- Call risk managed prudently
AAM believes the best way to capture equity market return is through a liquid, low-cost passive strategy utilizing exchange-traded-funds (ETF). We believe this eliminates the need for labor-intensive active management which we believe often underperforms the market in the long run. Periodic rebalancing can remove guesswork and emotion from equity investing. Bookkeeping and financial reporting can be simplified due to reduced trading volume and less portfolio line items.
Commercial Mortgage Loans (CMLs)
Commercial mortgage loans, which are collateralized by income-producing commercial real estate, are a staple of institutional investor portfolios. AAM offers our insurance clients the ability to invest in core commercial mortgages which seek to provide an attractive spread, principal protection, diversification, and call protection. CMLs are provided by Securian Asset Management.
The goal of our convertible strategy at AAM is to enhance long-term portfolio returns. To help achieve these results, we rely on a proprietary valuation model/methodology that identifies undervalued convertible securities exhibiting favorable risk/return characteristics. Convertible bonds are managed by Zazove Associates, LLC.
High Yield Bonds
We believe high yield (below investment grade) and bank loan strategies can offer insurance companies enhanced income potential with desirable diversification benefits. In addition to the income benefits of the asset class, the performance of high yield bonds has been similar to equities over the past two decades with dramatically less volatility. High yield is managed by Muzinich & Co.
At AAM, we believe that Private Placements provide investors an opportunity to generate higher total returns versus holding a basket of similar-rated public bonds. Also, Private Placements add diversity through names that may not be available in the public market, and can provide structures that help to manage the downside risk by offering covenants to protect the bondholder if financial performance turns down. AAM has a sub-advisor relationship for Private Placements with Securian Asset Management.